July 2013

‘It’s raining, it’s pouring. The old man is snoring.’ Truth be told, I apparently snore, and I suppose I’m not that young anymore. But hard to believe, I’m sure this nursery rhyme is not about me. And despite the recent Noah-like floods in Europe, Bangkok, Calgary, Dhaka, Jakarta, New York and Toronto, it’s not really about any one city, or any one country, or even any one continent. But, ‘went to bed and bumped his head. And won’t get up in the morning,’ aptly describes our current political paralysis.

Many children know this song. Soon they will learn how their grandfathers and fathers slept through the rain.

Here in troubled Toronto and gritty Calgary, there was the inevitable debate on whether or not the recent floods could be attributed to climate change. ‘If it’s this bad now, what’s the future hold?’ people wondered. ‘Sleepwalking into trouble,’ came to mind for many.

Merchandise trade has become an increasingly important contributor to a country’s gross domestic product (GDP), particularly for developing countries. Before the global financial crisis hit in 2008, merchandise trade as a percent of GDP for low- and middle-income economies was 57 percent, about 5% higher than for high-income economies. This is very evident in Europe and Central Asia (ECA) where merchandise trade accounts for 73 percent of the developing region’s GDP. Many ECA countries including Hungary, Belarus, and Bulgaria have merchandise trade to GDP ratios above 100 percent (155, 136, and 114 percent respectively in 2011), meaning merchandise exports are a large contributor to their overall economy.

Financial Markets…All European government bonds are gearing for weekly gains on Friday amid growing speculation that global central banks will maintain their stimulus program for some time. German 10-year yield fell to 1.5% earlier, the lowest since June 7, while comparable Italian yield touched 4.36%, the lowest level since July11. Notably, Portuguese bonds headed for the first weekly gain in more than 2 months despite ongoing country political unrest.

Is China, after a hiatus of 150 years, again the largest economy in the world? Not all sources of GDP data agree, but there is little doubt that China is either already now the largest economy, or it will, within a year, become so by overtaking that of the United States. Whichever the case may be, a long era when the American economy was the largest in the world and which began around 1860, is now reaching its end.

Data on gross domestic product (called now Gross Domestic Income) are available from three sources: the Maddison project, which is the only source for the long-run series of national GDPs, going back to 1820s; the World Bank or IMF annual data, going back to 1960; and Penn World Tables, produced periodically at the University of Pennsylvania, going back from their just-released version 8.0 to 1950 . All three sources produce GDP data in PPP (purchasing power parity) terms, which means that they adjust for differences in price levels between the countries. The easiest way to explain it is to say that PPPs try to account for each good and service using the same price for it around the world, so that a mobile phone, a kilo of rice and a haircut would each be valued the same in China as in the United States. Only thus can the real sizes of the economies, and the welfare of people, be truly comparable. These PPP data, in turn, are obtained through a massive worldwide project called the International Comparison Program, which is run every five to 10 years and collects more than 1,000 prices in all countries.

The Center for Financial Inclusion blog discusses new global data on corruption - Sierra Leone recorded the highest rate with 81 percent of polled individuals reporting that they had paid a bribe during the past year, followed by Liberia, Yemen, and Kenya, with 75, 74, and 70 percent, respectively.

Yesterday I idly tweeted a request for the Monty Python sketches most relevant to development. Great response, uncovering some forgotten gems – turns out Python fans are everywhere, (and they’re not even all men, well not 100% anyway). Too many for one post, so today we’ll do politics. Here are my favourites (with credits where due):

Conflict is a major cause of poverty in the developing world today. In addition to endangering lives, conflict disrupts the functioning of an economy in many ways. It destroys infrastructure, prevents children from going to school, and closes factories. A little-studied economic impact is conflict’s tendency to restrict the mobility of goods and labor within and across borders. These restrictions are caused both by insecurity associated with the conflict and by explicit barriers that constrain the mobility of people and goods. Our recent World Bank study measures the harm such barriers have caused the economy of the West Bank by limiting mobility in the Israeli-Palestinian conflict.

Financial Markets…The dollar strengthened versus global major currencies after Federal Reserve Chairman Ben Bernanke confirmed that gradual scaling back of the central bank’s monetary stimulus program could begin this year. The greenback gained 0.7% against the yen to 100.32, while it appreciated 0.4% against the euro to $1.3077. The dollar also gained considerably against developing-country currencies.

"Let us pick up our books and our pens. They are our most powerful weapons,” said Malala Yousafzai, the 16-year-old Pakistani girl shot in the head on her way back from school in Pakistan’s Swat Valley last October.

“One child, one teacher, one book and one pen can change the world. Education is the only solution. Education first,” she continued from the podium at the United Nations Headquarters in New York on July 12, her 16th birthday. July 12 — “Malala Day” — will now be marked and celebrated by citizens worldwide, a day where people can advocate for education and girls’ empowerment.

If you missed Malala’s speech at the UN, you can watch the full video below.